Keeping Britain in the E.U.

By Hugo Dixon

June 29, 2014

It is not just Britain that would be hurt if it quit the European Union. So would the rest of the bloc. Jean-Claude Juncker’s nomination on Friday as president of the European Commission, the Union’s executive branch, increases the chance of Brexit — Britain’s exit from the group. Leaders from all countries now need to work to cut the risk.

David Cameron, the British prime minister, went out on a limb to block Mr. Juncker and failed. Mr. Cameron badly mishandled the diplomacy, including allowing it to seem that he was threatening to pull out of the Union if Mr. Juncker, a former Luxembourg prime minister, got the job.

The chances of Britain quitting the Union in the next five years are probably about 20 percent. That is made up of, say, a 50 percent chance of Mr. Cameron winning the general election next year and a 40 percent chance of the British people voting to quit in a referendum he has promised to hold by 2017.

The opposition Labour Party won’t hold a plebiscite if it wins the general election. But that doesn’t mean the question will go away, as Conservative euro-skeptics and the U.K. Independence Party will not give up — meaning there could be a referendum after 2020.

Some continental Europeans may say “good riddance” if Britain quits the bloc, on the grounds that it has long been an awkward member and, without it, the Union will be able to run its affairs more smoothly. But there are five strong reasons for keeping Britain inside the tent.

The first is precisely because Britain is often prepared to be awkward, calling a spade a spade — for example, when it raised doubts about the common-currency project.

Second, Britain has a track record of pushing for free-market reforms — both to open up the Union’s market and cut trade deals with other economic blocs. Without the British voice, the European Union might become more protectionist, and that would be bad for its economy.

Third, Britain accounts for 15 percent of the Union’s gross domestic product. It now has the third-largest economy, after Germany and France. In 30 years, it could have the largest. If Britain cuts itself off even partially from this single market, it will be badly hurt, but the rest will also suffer.

Fourth, a Brexit would upset the bloc’s internal dynamics. Many other countries would fear that the Union would become even more German-dominated. Berlin, meanwhile, would worry that southern states would find it easier to gang up against it.

Finally, the Union’s foreign and security policy would suffer a severe setback. It is easy to mock the current approach, which has little to show for itself. But one only has to look at the Union’s unstable neighborhood — Ukraine and Russia to the East, North Africa and the Middle East to the south — to appreciate that it is going to need to get serious in the next decade or so. Without Britain, the bloc would have less clout.

So how can European leaders cut the risk of Brexit?

For a start, Mr. Cameron needs to play the European Union diplomacy game better. That means quickly making peace with Mr. Juncker. Why not invite him to Downing Street? The prime minister should also propose a heavy hitter as Britain’s own European Union commissioner — somebody like William Hague or Michael Howard, both former leaders of his party.

Meanwhile, Mr. Cameron needs to build more alliances. He made the error of relying too much on Chancellor Angela Merkel of Germany. Britain also needs allies in Italy, France, Spain, Poland and other nations.

The other Union leaders offered Britain a couple of concessions at the summit meeting last week. They said they would review the system of nominating future commission presidents. This is important because the way in which Mr. Juncker was chosen amounted to a power grab by the European Parliament. The leaders should make clear that this will not set a precedent.

The summit meeting also interpreted the phrase in the European Union treaty calling for ever closer union among the peoples of Europe as “respecting the wish of those who do not want to deepen” integration any further. That formulation will not satisfy British euro-skeptics, for whom the phrase is a bugbear. But with a few tweaks. this olive twig could become a full olive branch.

If Mr. Cameron does propose a heavy-hitter as Britain’s commissioner, other leaders should respond by offering that person a top job.

They should also sharpen up the work program they have sketched for the next five years. The core of this should be: a renewed drive to complete the single market; free trade deals with the United States and Japan; a revamped energy policy; building up nonbank finance so it can take up the slack as banks shrink; and cutting regulations.

A plan like this would not just be good for growth and jobs in the bloc, it would help those Britons who want to stay in the Union make the case for doing so in any future referendum.

Hugo Dixon is editor at large of Reuters News and author of “The In/Out Question: Why Britain should stay in the EU and fight to make it better.”